TrendLines

May 24, 2018

WASHINGTON - The second round of negotiations in Washington between the U.S. and China to resolve a long standing trade dispute has yielded mixed results. With US Commerce Secretary, Wilbur Ross, expected to visit China next to continue the talks, investors will seek credible action from both sides to diffuse trade tensions further.

ON A positive note, the two sides acknowledged the need to avert a trade war and that continued formal talks were the best way to address bilateral trade issues,” says BBVA in a research note.

“Post-meeting statements to this effect from China’s top economic advisor, Liu He, and U.S. Treasury Secretary, Steven Mnuchin, should help soothe unnerved investors’ fears of a lose-lose trade war.

“The former noted that ‘both sides agree not to go ahead with imposing tariffs’, while the latter stated: ‘We’re putting the trade war on hold’.




March 29, 2018

TRADE finance default rates from 2008 to 2016 are low across all products and regions – but despite its low-risk nature, trade finance is a product that is shrinking as banks retreat to their core businesses . . .

Having analysed US$10.5 trillion in trade finance transactions and US$670 billion in export finance exposures, the International Chamber of Commerce  (ICC) has concluded that financing trade is a low-risk business.




March 3, 2018

CHRIS PATTEN is ardently pro-EU. He sees Brexit as a betrayal of the UK - and a bar to Britain remaining a major player on the world stage. And he is clearly no fan of how world politics is panning out . . .

CHRIS PATTEN can be best described as an over-achiever.

Across the 300 pages of his First Confession [Allen Lane, 2017], he wears a bewildering number of hats: Chairman of the Conservative Party; British Cabinet Minister; the EU’s European Commissioner for External Affairs; confidante of Lee Kuan Yew; crony of Margaret Thatcher; chastiser of China; English patriot; Chairman of the BBC; Co-Chairman of the International Crisis Group; advisor to Pope Francis; Chancellor of Oxford University; and — most famously — the last Governor of British Hong Kong. 




March 2, 2018

AN ADB survey finds that 57% of trade finance requests by SMEs are rejected, compared with only 10% for multinational companies . . .

THE Asian Development Bank (ADB) has identified a gap of US$1.5 trillion in trade finance in the global market in 2016.

In its Trade Finance Gaps, Growth and Jobs Survey, the Manila-based multilateral institution found that the funding gap affected — and continues to affect — SMEs most.




March 1, 2018

THE HKSAR Government is committed to the development of innovation and technology and has pledged more than US$3.6 billion to various programmes since 2015, the Financial Secretary, Paul Chan, told delegates to this year’s Hong Kong Startmeup Festival

“To sustain our competitiveness in the 21st century, we need a new engine for our economy in the form of innovation and technology (I&T),” Chan said. 

Hong Kong is focussing on four areas – AI and big data analytics, biomedicine, smart city and fin-tech. “We are also working relentlessly with industry stakeholders to enhance Hong Kong’s ecosystem for start-ups,” he said. 




February 27, 2018

THAILAND is focussing on higher education and smart farming to entice more Australian investors . . .

BANGKOK — The Thai Government has moved to strengthen the teaching capacities of it education system ­— especially in the area of emerging technologies — by encouraging the involvement of foreign higher learning institutions in twinning of courses and curricula, joint co-operative arrangements, and through direct foreign investment.




January 31, 2018

IN THE near term, Thailand’s economic prospects at the close of 2017 are significantly brighter than at any time during the past several years . . .

BANGKOK ­— In terms of its economy, Thailand clearly turned a corner in 2017. What remains murkier, however, is whether Thailand as a society has succeeded in turning the page.
With the year coming to a close, the Thai economy was nearing 4.0 per cent growth as exports, the main pillar, came roaring back to life, approaching a record US$236 billion in value.
While that gross domestic product (GDP) rate does not compare to the soaring figures Thailand posted in earlier decades, it is also a far cry from the gloomy forecasts of critics who claimed the unelected Government was not capable of managing the economy.
With fourth quarter GDP coming in at 4.3 per cent – the highest quarterly rate since the first quarter of 2013 – the National Social and Economic Development Board (NESDB), Thailand’s chief planning agency, raised its growth forecast for the year to 3.9 per cent.
Exports and tourism have been driving most of the gains. But investment has also been key.




January 31, 2018

IT NOW seems clear that Abenomics has many more years to run. One should be wary of Japan sceptics  . . .

TOKYO — In a note on the implications of Prime Minister Abe’s re-election, the Chief Global Strategist of Nikko Asset Management, John Vail, along with NAM’s Chief Investment Officer — Japan, Hiroki Tsujimura, and Head of Japan Equity Fund Management, Jiro Nakano, say there is little doubt that Abe wants a rising stock market.
“Now that his term seems very likely to extend to 2021, Abe will likely work on a constitutional amendment to legitimise Japan’s military forces, and hike the VAT by 2.0 per cent in October 2019, but he will also continue to push for economic reforms and monetary accommodation,” they say.
“Since he is now the most powerful Prime Minister in modern Japanese history, he should be able to achieve all of these goals, especially now that the main Opposition party has been fractured by Yuriko Koike (who) will almost certainly push her Coalition (and all her supporters nationwide, most especially women voters) to vote for the Constitutional amendment.
“Rising stock markets encourage consumer spending via the “wealth effect”, at least among the wealthy segment that accounts for the majority of any country’s personal consumption. The capital gains associated with such are also a major factor in the future reduction of fiscal deficits.”




January 24, 2018

HANOI — Vietnam, buoyed by a revived Trans Pacific Partnership (TPP) trade pact and a regional trade agreement dominated by China, is in the box seat in an  outlook driven by investment and growth .  . . .

THE Trans-Pacific Partnership (TPP) — feared to have floundered after President Donald Trump withdrew U.S. support earlier — gained a second wind at November’s Asian Pacific Economic Co-operation (APEC) meeting in Da Nang. The remaining 11 nations agreed to press on with expanded trade and investment programmes.
“Vietnam is in the box seat right here. It desperately wanted the TPP,” Carl Thayer, a defence analyst with Australia’s University of New South Wales, told ATI.
The revived TPP, now termed the Comprehensive and Progressive TPP after intervention by Canada, is undergoing fresh talks towards a final agreement. The TTP’s 11 nation members would include Australia, Chile, Japan, Malaysia, Mexico, New Zealand, Peru and Singapore.
Vietnam was considered a winner under the earlier TPP pact, with World Bank forecasts that, by 2030, economic benefits would add about 8.0 per cent to its GDP.
The key industries to gain from TPP were textiles and garments and global supply chain operators, as in telecommunications, taking advantage of Vietnam’s close proximity to regional economic giant China.
Vietnam is also a member of the China-dominated Regional Comprehensive Economic Partnership (RCEP), which is centred on the 10 ASEAN nations and  countries with free trade pacts with ASEAN — Australia, China, India, Japan, South Korea and New Zealand.
“Vietnam can follow (the TPP) path and it can follow RCEP, which China is espousing, at the same time — it is not mutually exclusive,” Thayer said.
But Pavida Pananond, a Professor of International Business Studies at Thailand’s Thammasat University, says that, without the U.S. role in TPP, China influence over Vietnam’s trade profile has risen.
Pavida, told ATI said while the “size of potential gains from trade and investment may be reduced for Vietnam, [in the absence of the U.S.] it remains attractive as the only member in Asia with relatively low costs and a large growing market”.
She said that, despite the revised TPP agreement, Vietnam would remain “significant” in its overall standing in intra-regional trade and investment in Asia.
Vietnam’s economic outlook has risen in recent years. “The near-term outlook is positive,” the United Nations reported in its annual economic and social survey for Asia and the Pacific (UNESCAP). The UN has projected Vietnam’s growth at 6.5-6.7 per cent over 2017 and 2018.




January 17, 2018

HONG KONG, Macau and nine cities in Guangdong are set to form China’s Greater Bay Area as the concept of 70 million people integrating to become China’s technology, innovation and financial services hub moves towards reality . . .

TO understand the thinking behind China’s Greater Bay Area (GBA) concept for the Pearl River Delta, one has only to look to the Greater Tokyo Area, Greater New York or the San Francisco Bay Area.
China’s vision would see a closer economic cluster of 11 cities, including Hong Kong, Macau, and nine in Guangdong’s Pearl River Delta create an economy as vibrant as those of Tokyo, New York and San Francisco.
The GBA already has a collective economy of US$1.4 trillion — equivalent to 12 per cent of Mainland GDP.  It would have a greater population mass of around 70 million, but a lower combined GDP than Greater New York (US$1.61 trillion) or Greater Tokyo (US$1.78 trillion).
Hong Kong’s Chief Executive, Carrie Lam, said in November that the Governments of the Special Administrative Regions of Hong Kong and Macau, together with a number of cities in Guangdong, are working with China’s Central Government to map out a development plan for the Greater Bay Area.
Lam says the plan is due to be completed next year, and China’s State Council will then need to approve it. Following that, a lot of work will need to be done to turn the concept into reality.  
In terms of physical connectivity in the GBA, three important projects will be commissioned next year.
One of these is commissioning of the Hong Kong-Macau-Zhuhai bridge, which will cut the journey between Hong Kong and Zhuhai from four hours to 45 minutes.




January 17, 2018

Xi Jinping wants China to be a global leader in 10 chosen industries, including the Internet, big data, electric vehicles, semiconductors, robotics, pharmaceuticals
and artificial intelligence, by 2025 . . .

THE Pearl River Delta is morphing into what some now dub Silicon Delta, China’s answer to Silicon Valley in California.
China is home to some of the world’s most valuable ‘unicorns’ — private companies valued at US$1 billion or more — while its top tech companies now rank among the world’s tech leaders.
Such is the optimism surrounding China’s growing innovation potential that some believe the “next big thing” could well come out of Silicon Delta.
Addressing the HSBC Australia China Conference in Sydney in November, Frederic Neumann, HSBC‘s Co-Head Asian Economics, said China is making great advances in high-tech industries.
“One thing I really want to stress is that China is no longer a copycat market. Some of the most exciting innovations are happening in China,” he said.
Helen Wong, HSBC’s Chief Executive, Greater China, concurs: There was a time — not so long ago, actually — when Chinese tech companies were dismissed as mere copycats,” she says. “But not any more. China is now punching above its weight on innovation.




December 21, 2017

JAPAN, Hong Kong, South Korea, Taiwan and Singapore have embraced INDUSTRY 4.0, the Fourth Industrial Revolution.
China, too, but under a different name, Made in China 2025.
At the heart of INDUSTRY 4.0 is digitisation and artificial intelligence. Success will breed tomorrow’s global economic leaders.
The wild card is the United States. An early adopter of INDUSTRY 4.0, it has the financial muscle, academic skills and consumer resources essential for rapid growth in a new frontier.
Perhaps Donald Trump saw INDUSTRY 4.0 coming when he coined his key campaign slogan, Make America Great Again . . . 

THE decade ahead will reshape global manufacturing as demand grows, technology unlocks productivity gains, and companies find growth in new parts of the value chain.
Manufacturing is being reshaped by three major trends: rising demand, the convergence of multiple new technologies, and shifting global value chains.
It could also be a decade in which the United States re-emerges as the manufacturing powerhouse of the future, according to a new paper on manufacturing in the U.S. produced by a McKinsey Global Institute research team.
Although China claimed the mantle as the world’s top manufacturing country in 2010, the United States still ranks second when measured by the dollar value of its annual output and global market share.

In 2015, U.S. value-added in manufacturing reached US$2.2 trillion – more than 2.5 times more than the total recorded by Japan and three times more than that of Germany.
MGI says that, after combining demand projections with an analysis of specific industry trends and historic performance, it finds that the United States could boost annual manufacturing value-added by up to US$530 billion (20 per cent) over current trends by 2025.
MGI estimates the U.S. manufacturing sector would add 2.4 million jobs on top of current trends.  Furthermore, it says, the positive effects would ripple into services, resources and other industries that produce upstream inputs for the manufacturing sector.
“We estimate the direct impact of these purchases at US$170 billion in direct value-added and almost one million jobs. Adding together the manufacturing and upstream effects, the total potential benefit to the economy could be US$700 billion and roughly 3.3 million new jobs.”
McKinsey says there is no denying that U.S. manufacturing has been through two rocky decades, absorbing losses that have taken a toll on workers, communities and the nation’s optimism.




December 13, 2017

FOLLOWING up a  GST with its new Insolvency and Bankruptcy Code, an amended Arbitration Act requiring faster settlement of commercial disputes, and recapitalisation of the banks  has allowed the Modi Government to present a more enticing offering to international investors. The rules of the game have changed . . .

INDIA’S Modi Government has introduced game-changing corporate and taxation reform that could trigger far-reaching implications for its economy.It now has a goods and services tax (GST), an up-to-date Insolvency and Bankruptcy Code (IBC) and an amended Arbitration Act which requires the hearing and settlement of commercial disputes to be completed within a maximum of 18 months.According to key executives of one of India’s top legal firms, compared with three years ago, the investment climate is “100 per cent” better.
Pallavi Shroff, a Managing Partner of the Delhi-based Shardul Amarchand Mangaldas & Co (SAM), says the States are actually competing with each other for investment.
“They are trying to facilitate investment,” she says. “Approvals still take a bit of time, but the whole process is much simpler today.”
The impact of the changes is freeing up distressed assets, including manufacturing plants, for ownership transfer to new investors.
Until now, banks have been hamstrung by archaic legislation which protected the sponsors of companies. As a result, banks, particularly public sector entities, were weighed down by non-performing loans.
The changes have rekindled investor interest in India, a destination that was once difficult and unpredictable ­— in large part because of unhelpful Government policies.
The Modi Government, it seems, has done what its predecessors were unable to deliver — a single simplified taxation system — and has taken over the powers of the States to collect taxes. It has also reduced bureaucratic red tape.
It is early days yet with these reforms, but the first signs are promising. Investors are reassessing India. In just one sector alone – real estate – an estimated US$10 billion in new investment has flowed in.
Shardul Shroff, Executive Chairman of SAM, regards the GST legislation as India’s most far-reaching change yet.
“The Government has made Constitutional amendments giving it power to take over taxation from the States,” he told ATI. “In doing so it has reduced State authority and vested the Centre with the right to collect and distribute taxes between manufacturing States and consuming States.”




December 13, 2017

CHINA is one of four major factors that will reshape the global energy market over the next two decades, says the International Energy Agency. The others are the U.S., which is set to become the undisputed global oil and gas leader, development of renewables, and a growing share of electricity in the energy mix . . .

CHINA and its new industrial policy will play a key role in helping the world transit to a cleaner energy environment over the next two decades, according to the Paris-based International Energy Agency (IEA).
In 2017 World Energy Outlook, its flagship publication, the IEA says China is increasingly switching from coal to solar, other forms of renewable energy and natural gas.
It says China is entering a new phase in its development.
China’s President, Xi Jinping, has called for an ”energy revolution” in the “fight against pollution” as he aims to guide the Chinese economy to one based on services, leaving behind low-end manufacturing.
The publication notes that Xi’s policies are moving China’s – and, in turn, the world’s — energy sector in a new direction, with the emphasis in energy policy now firmly on electricity, natural gas and cleaner, high-efficiency and digital technologies.
It says China’s previous orientation towards heavy industry, infrastructure development and the export of manufactured goods has left it with an energy system dominated by coal, and a legacy of serious environmental problems. Almost two million premature deaths occur each year because of poor air quality.
Under Xi’s new industrial policy, the agency says China’s energy usage is moving in a new direction.
Demand growth has slowed markedly from an average of 8.0 per cent per year from 2000 to 2012 to less than 2.0 per cent per year since 2012. The IEA expects this to slow further to 1.0 per cent a year to 2040.
“Energy efficiency regulation explains a large part of this slowdown,” the report says. “Without new efficiency measures, end-use consumption in 2040 would be 40 per cent higher. Nonetheless, by 2040, per-capita energy consumption in China will exceed that of the EU.”




December 13, 2017

Liem Sioe Liong and Suharto had a classic patron-client relationship – the payback was funds channelled the President’s way . . .

IN Julius Caesar, Shakespeare wrote: “There is a tide in the affairs of men, which, taken at the flood, leads on to fortune.”
Such was the luck of Chinese business entrepreneur Liem Sioe Liong, who landed in Java in 1938 as a dirt-poor migrant from Fujian province, in China.
He not only caught the tide, he became the chief financier and cukong (crony) of President Suharto.
In post-Sukarno Indonesia, Liem surfed on a tsunami of wealth and political power, and soon became recognised as Southeast Asia’s wealthiest tycoon.
Suharto hungered for power, Liem for money. Together, “they made a potent team that kept them on top in Indonesian politics and business respectively for three decades”.
Liem’s gutter-to-glitter journey is splendidly captured in Liem Sioe Liong’s Salim Group  by Richard Borsuk and Nancy Ching [ISEAS Publishing], a frank and revealing business biography which explores Liem’s life and times with painstaking care and in exhaustive detail (573 pages).
It also doubles as a primer on how to do – or not to do – business in Indonesia.




ANALISYS - Khoon Goh
December 12, 2017

Bank of Korea and Bank Negara Malaysia have turned hawkish in recent statements, laying the groundwork for interest rate increases . . .

AFTER FOUR YEARS of depreciation, Asian currencies put in a much stronger performance in 2017. Our Asian currency index shows a gain of 4.6% year-to-date against the U.S. dollar. 

How Asian currencies fare in 2018 will depend on which of two contrasting forces dominates: (i) the effect of policy normalisation in the major advanced economies on capital flows to emerging markets; or (ii) a strengthening and broadening of Asian economic growth with export recovery spilling over into domestic demand.




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